Affluent property developer John L Fitzgerald, from JLF Group, has a focus on buying land in areas of growth that will inspire you to kick-start your own property journey. Also, find out why you should be looking interstate for your next property and how you can build your wealth in seven steps!
Discover why Fitzgerald says you should always triple check the cash flow rate before making a commitment, how you can find your all-important mentor to guide you in your property investing journey and learn from a template to success that 3 of Australia’s top investors endorse as a great way to accumulate wealth.
Starting his company when he was very young, Fitzgerald has invaluable experience in creating and running a business. But it is finding a purpose and a balance along the way that has been a challenge.
My name is John Leonard Fitzgerald and my company's JLF. I started my company when I was 18 years old, which is crazy and I must have had these egotistical visions of grandeur, of having all these companies. And now I suppose I've got 26 companies that I've operated for over 30 years and I look back on the whole journey and say, ‘Wow, you do need to have some balls, you need to get out there and make a statement of who you are or who you want to be at a certain stage, but you've also got to have some balance to that.’
And I suppose I’m here to give all of your listeners some of the balances that I've found have been valuable to me in creating, then running a business and finding purpose in both those two things.
So what does he do in any given day?
My main business is property and property development and I also run a school for youth at risk. So I do two things on any particular day: I coach my headmaster at the school, we have 100 boys who have been kicked out of all mainstream schools and we have shit going on all the time there.
And the second thing is I oversee my operation, which is in five states and we've done 370 developments in five states around Australia. We're developing pretty much all over the place. While that is phenomenal, I mean humanish, that's quite a lot going on as I think I need to go have a lie down right now.
Growing up, Fitzgerald’s upbringing was coloured by the trauma of a parent’s passing and financial struggle.
Well my story is interesting in this regard - I’m a Melbourne boy, born and bred in Melbourne and one of five kids from an Irish Catholic family. And you know Fitzgerald, obviously the Fitzgeralds immigrated from Ireland in the early 1900s and landed in Melbourne. My grandfather had 11 kids and my dad was the youngest of those 11. So when I was eight years old, I was the third in the pecking order with two older brothers and two younger sisters.
My dad was killed in a car accident and it was… life is an amazing thing, because the timing of it couldn't have been any worse for Mum. Dad had three businesses, menswear stores that were going OK but really needed his involvement. And Mum was a stay-at-home mum and on top of all of that, they had a house half under construction. So you know life just was turmoil. Mum was a 40 year old widow who had to then go into business; she hadn't worked for the last 15 years as she was bringing up kids, the three older kids, which as I said I was eight and my two other brothers 10 and 12. A year later Mum said, ‘Look, we're struggling, we need to send you away to boarding school.’ And this was in 1974, so I got the news that I was going to be sent away. She went to the Christian Brothers in Melbourne and said, ‘Will you take these boys?’ And I was shipped off to Christian Brothers College in St Pat’s in Ballarat which became the whole... there was a whole controversy in this whole St Pat’s thing going on at the moment. The epicentre of that was in Ballarat and I’d probably say patterned everything going on there.
And just as a sidebar on the issue, I was listening to - and I don’t take that much interest in it - but I was listening to bits and pieces on the news in relation to the inquiry and I heard a lady say that the damage that has happened over that time can be equated to the fact that 14 kids or their families committed suicide, who attended St Pat’s during that particular time. And when I was listening I was thinking, ‘Wow, I actually know some of those kids who committed suicide,’ and then just put two and two together, that they must have been victims of sexual abuse.
After completing his schooling there, he was ready to get out and find a positive direction in his life.
Anyway I landed at boarding school at age 10 in 1974 and I can honestly say, I spent five and a half years there before I got kicked out of that school in year 11. And then, crazily enough, Mum begged them to take me back in year 12 because you know I just thought there was no chance to be getting matriculating, so they took me back in year 12. But the minute I finished school I was out of there, I was out of Ballarat and I was out of Melbourne and I hitchhiked from Melbourne. I finished in January 1980, I went downstairs, I had a backpack and said, ‘Man, I'm off.’ ‘Where are you going?’ ‘I'm 16 years old man, I'm hitchhiking to Queensland. There's nothing for me in Melbourne and you know, I've had a gutful, I don't know what I want to be.’ When I think back and think how I imagine having a 16 year old like me, it would have been a terrible last year. And so Mum said, ‘Look, by all means.’ I think she was glad to get rid of me; she said, ‘Whatever happens happens, I wash my hands of you.’ So I said, ‘You know, it's OK, fine.’
So I hitchhiked from Melbourne to Queensland and that's when I think life took another turn. And I tell kids who I mentor who say you know, ‘John what should I do when I finish school?’ I say, ‘Here's what you should do - get out of your comfort zone and go and discover yourself.’ And the thing about leaving Melbourne and coming to Queensland, I did not know anybody so I had to reinvent myself - and I could reinvent myself in whatever way that I thought I wanted to be. And I got there in 1980, in the middle of a massive property boom going on and you could feel it, you could feel it in the energy as you always do. I thought, ‘Wow, I've got to get into that, I've got to be a part of that.’
So I started work as 16 year old; I started work in a real estate office, selling real estate for a fantastic guy called Bert Cockerell. And Bert was a jack of all trades, he did the fishing report on the radio, he owned the Palm Beach theatre, he owned another motel in Miami and he was building a big house himself. I spent a bit of time with him. He wasn't a mentor in the sense that he couldn't give me the time and then I saw that I needed to find a mentor, someone who's been in the business for 20-30 years or somewhat that can really guide me and had a lot of energy. But to no direction.
Then Fitzgerald reached out to the wealthiest person he knew, for guidance.
I reached out to the wealthiest guy I could find who owned shopping centres and he connected me with a Jewish guy called George Margolis. And George was a guy who owned probably half of Cavill Avenue in Surfers Paradise, back in the day, and lost it all when he went to Lane Subdivision in Gladstone in the crash of the 1970s. And he was emerging, he moved back up to Queensland in 1979 and he was funded by some Jewish connection from Melbourne. He took me in and literally took me under under his wing. This is probably the turning point that I say to people, ‘Success is about your habits.’ George used to say to me, ‘John, do two things everyday you don't like doing.’ And I remember thinking to myself, ‘Well the one thing I hate doing is getting up early.’ I thought that that is the number one on my list; so since then I made a dedicated effort to do that.
He said, ‘Then do two things everyday you don't like doing and then, learn to like your dislikes. Learn to like your dislikes, make that a habit.’ I used to get up every morning at 6 o'clock and now, you know 30 plus years on I'm still getting up, in fact I get up at probably five o'clock everyday. And the other thing that I hated doing was knocking on doors. You know I think it was just the fear of rejection and all that sort of stuff - and I just knocked on doors and knocked on doors and knocked on doors. And I'm still knocking on doors. I'm still doing that, whether it's billionaires doors in China, I'm just out there. If someone's moving or want to know what's going on, or to meet them, or you know want to find out about it. And I think that the habits that I've adopted… firstly learn to like your dislikes and most importantly, face those obstacles and challenges rather than turn away from them.
His mentor also taught him another valuable lesson, which became the basis for Fitzgerald’s book Seven Steps To Wealth.
And the second thing he taught me which is interesting other than that, ‘There's only truth in numbers and successes repetition.’ And that was a penny that really did take a while for me to drop and that's when I wrote the book Seven Steps To Wealth, which I’m going to talk about a little bit later, in its eighth edition. All the things that I tried to communicate to strangers about real estate, number one is that the money's in the land, the land is the appreciating asset, and number two the mathematics of success is compound growth. That's what it is, that's the maths Warren Buffet uses, Bill Gates, anyone uses compound gross. So if someone's got a formula for success, I will ask them, ‘What is the formula that gives you compound growth?’ And that's what I let work from my mentors. So that was the beginning, so-called, of me. I had decided I outgrew George in the real estate side of it within a few years.
His parents also had somewhat of an influence in his property journey.
If [Dad] would have been alive, he would have; he would have had a strong interest in property, because I knew he loved the property. And Mum, because I'd been working in property, she started buying houses - and she did well out of it but she wasn't an active property investor or somebody committed to do that as a an investment tool that was going to make her wealthy. Albeit she had quite a few houses, as she did build up a window which she sold to businesses and she retired, sold her business and she put her money into property. But she felt it was better in property ownership back in the 70s-80s, high inflation time, she just thought her money was better in property than in the bank.
And Fitzgerald’s passion for property is clear, through his close connection to the real estate industry over so many years.
I've never been in any other job than just real estate. So I started selling real estate, then I did syndication, then development and then when I could I just started buying, selling and trading myself, developing and then building my portfolio. I still have not done another job.
The first deal Fitzgerald undertook was in building spec houses.
The first deal I ever did, the first big deal, it was some sort of like I started building houses, spec houses, and I was buying land for like $16,000 a block for 1,000 square blocks and building houses for around $30,000. So the total cost was $46,000, I'm selling them for $55,000 and that was a lot of profit.
Then I was sort of trying to get a business up and running to do that. And my skill set wasn't actually in building, my skill set was actually finding and buying the land - and buying the land really, really well!
Since then he has turned all of that into a system that works. But how did he manage to balance his career with actively buying and selling property?
Well the thing about my mentors is that they teach you habits and those habits lead to building a team of people around you, because you attract people similar to you with the same habits. And once you realise that, you realise that two plus two equals five. So I then had builders who said, ‘Hey John, we want to do business with you, we like you. You get up early, you run and hire other people; I want to do stuff, I want to do something.’ And when you get people saying that you think, ‘Wow,’ I mean I've got resources beyond myself. So that's when the penny started to drop for me.
By the age of 20, just two years into his journey, he found a great opportunity - but it would cost him!
So back in 1982-83, I started knocking on doors in Sydney and I was, what 20 years old, asking them to loan me $3 million, because by that stage I’d actually been buying and selling property.
I always think really big and I thought money was coming to southeast Queensland from mainly Sydney and Melbourne and a lot of it was the wealthy developers; and a lot of them happened to be Jewish. I sort of thought, ‘Well look, if I go down and see the developers and ask them to loan me $3 million, I’ll make them a deal.’ And what I did was, I found a deal - there was a massive block of land in Logan, behind the Logan Hyperdynamics and it was approved and zoned for 700 blocks. The owner had gone broke and the owner was a guy called John Bartlett and he had gone into default. The mortgage to that property was by a company called Entrad; they were just a property holding company that sold its about what it had a mortgage. And I knew the guys at Entrada and I said to them, ‘Look what if I can find a buyer to back me to buy it? I'll buy that waffle off you for $2.8 million.’
So they took a chance on me and gave me six months free option to find a partner or backer to buy that bigger land. Now the land was about 250 acres and I knew that the secret was it was approved for 700, but the average sized block was around 1,100 or 1,200 square metres and I could redesign the subdivision down to 700 square metres and improve the yield to maybe 1,200 lots. So I knocked on doors in Sydney, asking people to lend me $3 million saying, ‘We're going to buy this property, sell it in a year's time and when I get it rezoned for $5.5-$6 million, they'll make a million dollars.’ I thought it was a good deal for them, a good deal for me.
He soon found that this was a lot harder than he thought.
Twenty doors shut in my face, you know people laughed at me saying that because I was 20 something I should borrow it off my dad or something, you know. They said, ‘We'd be embarrassed, giving a 20 year old $3 million.’ But there was quite a door that just opened and it was a company called Daneford Ltd, who had built most of the high rises on the Gold Coast and the chairman was a guy called Michael Hirshon, who went on to become just a fantastic father figure and a mentor of mine. And it took him five minutes to wake me up, make a decision and said, ‘Here's what we'll do. I'll get to know you over the next couple of months and if I like you and my wife wants to, we'll do the deal.’
So he came up to Queensland, we spent some time together and it was mentorship and personal relationships, what are my habits, what do I do, all those sorts of things, are they funded? And sure enough, we bought the block for $2.8 million. We rezoned 1,200 blocks and then six months later, I took them a contract for $5.8 million. We had that property and this is 30 years ago, I sat there and there were three old Jewish guys and Michael Hirsh was there. I was sitting there I was, I was shitting myself, I was just sitting there opposite the table thinking, ‘I am the friggin golden boy and I've just made a million bucks,’ because the deal I did was they get half the profit plus 20% interest on their money, which at the time wasn't a lot because they hadn't put in the whole $3 million, we borrowed money from the bank. So the net to me was I would get a million bucks - and this is an amazing story, it’s life changing.
And I'm sitting there with these real estate guys and I said, ‘Guys it's been fantastic doing business with you, here's the contract for $5.8 million. You sign it and we're done. We'll celebrate and then we'll each go our own way.’ And they looked at me and said, ‘What are you talking about?’ and I said, ‘What do you mean what am I talking about? I said we did a deal where you lend me $3 million. I buy this, we sell it and then we're gone.’ ‘No, no, no, that's not how it works,’ they said, ‘You're our boy now, you're with us. So you’ve got to do all deals with us, that's how it works.’
If you've had success with someone, you keep going. I said, ‘Well look guys I'm telling you now,’ - I was 23 or something - ‘Guys I made a million bucks out of this; I want a million bucks.’ And they said, ‘Well look, let's develop the property. 1,200 lots in Brisbane, let's develop the property,’ and I said, ‘No, no, I want the million bucks.’ They said, ‘Why do you want $1 million?’ I said, ‘Oh you know, I want to buy a new house.’ And they said, ‘How much is it you have to set off?’ ‘$400,000.’ They got the checkbook out and wrote me a cheque for $400,000 and said, ‘Here's the $400,000, go buy yourself a new house. Tear up the contract and let's get to work!’
At 23 years old it was the biggest cheque he’d ever seen in his life, which he believed to be a divine sign in the direction he was meant to be heading towards.
I took the cheque, sat in the park, looked at it and thought, ‘You know I'm a person of destiny. God, the whole universe, has put me in this position and sent me to these people.’ We're connected as they are very, very successful. Let's go for the ride! We're just out for the ride and I still had an awful lot to learn. But you know, why would I check out? Why would I check out with just a million bucks when I could tap into their resources?
And better than that, they were just great people. They knew everybody, they knew everything. They were all in their 50s, 60s, so there was just a wealth of information. And their company was exciting and I wanted to be a part of what they were doing as well.
He believed this shining start to his property journey was the biggest a-ha moment that led him to achieve more great things along the way.
You never really do design your future, all you do is just visualise where you want to get to and just let the universe take you there. And it'll introduce you to people and take you to places that you'd never dreamed you would get to. But then, you'll feel the magic and it’ll start to click; go with it! Absolutely go with it, it's really important. And look I've got and have had lots of solid mentors, I learned from everybody I possibly can, but Michael Hirshon was my closest. The three of them have all passed away now, that's my closest confidante who was like a father figure to me - just a fantastic human being.
For those who are wondering what happened after the dust had settled, eventually Fitzgerald worked off the company’s residual debts and was able to attain his financial goals through becoming a developing success story.
So back in the 80s it was lunch and free money and Daneford were a massive property development company, they had over $500 million in debt. They were building 6 hotels, Brighton Le Sands, they had office buildings, they had Terry Hills, the biggest office park in Australia. They had just stuff everywhere and then I was their Queensland partner and the rules I had for them was I could use their balance sheet, but I couldn't borrow from the same banks as they did because they had a cap on their lending; so I could go to any bank. They had 28 banks that they borrowed from. I could go to any bank, but not their banks. So I did, I was buying land using their capital and their balance sheet right through the 1980s.
And then in 1991, in Paul Keating's recession that we had, the banks in Australia absolutely ran out of money and you know State Bank in NSW for example, who doesn't exist anymore, Commonwealth Bank took them over. Westpac lost $3 billion in the GFC, 28 foreign banks left Australia - and this is where Australia really did teeter on the edge of it and died for their company. That was a public company, but they had no personal guarantees and those three guys were very wealthy individuals themselves, they just put their company into liquidation. What I ended up doing was they were a partner in my business, so I bought out the receiver of the all their Queensland operations and I was funded then by the State Bank in NSW, ironically who were teetering on the edge of an administration themselves. That took a punt on me, which worked out really well. And what I ended up with was development sites - probably thousands of blocks of land to develop and I built buildings, commercial office buildings, and really you have inherited a portfolio but with debt.
Then I just had to work my arse off to get my debt down to a comfortable level and since then, I've literally just been developing, developing, developing.
However despite all the wealth he accumulated through those deals, he has always been involved in giving back to the community.
I actually took a bit of a left turn, because Michael Hirsh said to me when I was about 25 years old, ‘Hey, what are you going to be remembered for? Do you mean to be remembered for making money, or to something give back?’ So even when I was 26, I started a charity called Toogoola and that works with youths at risk and then converted it into a school. And now we have a cutting edge school with 100 kids - but there are 100 kids who have been kicked out of mainstream schools. And what I do, I spend Monday mornings and often a Thursday morning at the school and these days, I sort of get back from the business and spend more time at the school. That's what I really get an interest in.
And the byproduct of what happened after Daneford I think was that Michael sort of taught me that to can be young and successful, you do need to learn humility - and the only way you can properly learn humility is to give back unconditionally. So I took that route and that might have helped me with the banks in 1991 as well, because they saw that I had a registered charity, that we're doing stuff, so I thought they probably helped out and did a lot of development.
And then in 1997-98, I took another turn because I realised that Australia's biggest problem is that our baby boomers are retiring and they're going to be broke; and I knew that land was the secret. I had to communicate to them how to build wealth out of real estate, so I wrote a simple book called Seven Steps To Wealth, on two premises. One is focus on the land because land appreciates, buildings depreciate and secondly, compound growth. I've just literally been teaching Australians about that over the last 20 years and that's been a big part of my energy, in my efforts of my businesses. It's just teaching that and that's what took us to the eighth edition that's been released in the last few months.
To disclose a worst investing moment that has transpired in his journey, Fitzgerald has learnt that timing is crucial.
What you learn is that cash is like oxygen. If you run out of cash, it will be over very quickly for you and the term any property developer throughout the years has always known is if you've survived 20-30 years and all that sort of thing, then you would have had to have worked out how to survive running out of cash. Man, I think when I talk about probably the worst deal, there's no such thing as a bad deal it’s just bad timing. It will always go up. Have you got your timing right? I lost a million dollars once, I bought a subdivision in Redland Bay. I've got a lovely family subject to getting myself the approval, which I like to do for 300 odd blocks and it's my time to go unconditional. And I took a punt that I was going to get the approval within 90 days, which is when I was due to settle. And I didn't get the approval and I found out later on that there might have been some shenanigans going on with the council, that sort of thing. And you hear about that all the time and that's just part of the trade, I suppose.
But I didn't get the approval, so the bank wouldn't lend me the money to settle the block because it was rural - and I couldn't settle it and I had to pay them. They sold it and I had to pay them the difference; that cost me a million bucks. That's the worst deal I've ever done, from an active prospective. From a passive, I take a long term view and I've never done a bad deal. I always do my homework, I always do my numbers. So that's where you'll get yourself into trouble in property, is timing.
Don't be emotional about it. Everyone wants to buy around where they live and where you live is going to boom maybe two or three out of 10 years. You're better off, if you're going to be serious about building a property portfolio over 10 to 20 years, get used to doing your homework.
Your Seven Steps To Wealth: Why Land in High Growth Areas is the Way To Go with John Fitzgerald
Something that Fitzgerald believes holds many people back from investing into property is the looming fear of losing everything.
I had nothing to lose, so there was nothing holding you back. And the mindset gets harder as you get older, because as I coach people in their 40s and 50s their fear is what they can lose, that's front and centre. And then they have the fear of being broke at 65 which is the biggest fear, being broke at 65, or losing everything.
Now you shouldn't lose money in property if you set up your cash flow properly, so don't ever take a risk on cash flow. That's what I say to every investor; and you do your homework on that, don't kid yourself on that - triple check the cash flow and do your numbers. Only truth in numbers. So what I say to everybody is by the way it’s not for everybody you know, you can't sweat the small stuff.
You do have to recognise that you will have to manage tenants, talk to agents you know, communicate with valuers, banks and a myriad of people and you have to work with them. But if you can do that you can make millions of dollars out of property. I've got a client who started with $20,000, whose portfolio is worth over $3 million in net today. He started with $20,000! I could tell you lots of stories of people like that, but he doesn't sweat the small stuff and he's got a good backup plan. And look the only time you'll get into problems in property is cash flow.
So don't kid yourself on cash flow; cash is like oxygen, if you run out of it it’'ll be over very quickly for you. And that was drilled into me from the start and you know essentially, just triple check your cash flow rate.
In our previous chat with him, he attributed a lot of his initial success to his mentor, Michael Hersch. But how do you find such a great mentor?
They'll find you. You know when the student is ready, the master will appear. I remember I knocked on 21 doors and 20 shut in my face. The first door that I knocked on, my presentation took you know 25-30 minutes where I was just babbling on. The 21st door, it happened in five minutes. Michael Hersch said he just looked at me across the table and said, ‘You've got five minutes.’ I looked at him and I said, ‘It's so hot I only need 36 seconds. I'm John Fitzgerald, I buy and sell property. I've got a deal - we can buy 700 blocks, rezone it for 1,200 lots and double our money within eight to 12 months.’
It's amazing. It's over that many times of repetition and also practice, you really became articulate at what you had to put across and that's how you were able to put something across in such a short period of time.
You know they'll make their decision about you within one minute. Warren Buffett said he could do it in 10 seconds, but they'll make their decision about you in one minute and there's nothing worse than someone who babbles on.
Fitzgerald’s book Seven Steps to Build Wealth details how you can become a millionaire, endorsed by three of the wealthiest property investors in the country.
Look I'm really proud of the fact that three of Australia's property billionaires have read it and endorsed the book and that's really good. Bob Ell, Maha Sinnatham, and the late Nev Pask passed away a couple of months ago. The book is a template, Seven Steps to Build Wealth in property and it is fail proof.
Step 1 - and this is step one of any journey that you make - is commit to growth. So step one is growth now and in seven steps to all this, buy land for growth. Steps 2, 3 and 4 are cash flow, cash flow, cash flow; and that is your income, your tax deductions and your finances, how you set that up. Step 5 is making time work for you. This is really important. And 6 is affordability. Step 7 is that power of compound growth and repetition.
Now you could use this model for everything that we do in life, because everything has got to start with you’ve got to get up everyday, you’ve got to do this yourself.. So have I reached my full potential? No. OK, so what am I going to do today that’s going to take me one step closer? So that's where Seven Steps really gives you a mentor - and almost like what I learned off my mentors. It gives you a purpose every particular day, ‘How can I just go one inch closer, one inch further?’
Love that it's very very good. It's just those little things that you do as a habit that continues to compound and build and help you move towards closer to your goal.
Habits will make you or break you. We’re all made by our daily habits.
He has also read many inspiring books about others’ success stories.
I love autobiographies about successful people and I love Ray Kroc story which is Behind the Arches of McDonald's that was published. That's an old book now, I think it was really in the 1980s. But I loved it because one of the first deals I ever did was with McDonald's and I got to meet Pete Ritchie who ran McDonald's in Australia. So the whole Ray Kroc and the founder and everything like that. It's just a fantastic story. I really like the Frank Lowy story, that's an older book as well but it’s the story of Westfield. And Westfield is an interesting story because you know, technically if you had to put $1,000 in Westfield in 1960 when Frank started the place for more than $100 when they sold out a few months ago, that thousand dollars would have been worth about $300 million now. A lot of people don't realise, but that is compound growth on steroids. And Westfield's property strategy and their land strategy is absolutely phenomenal; so they're probably one of Australia's greatest companies.
Kerry Packer's story - I just love all those stories that I've read you know, all the main stories... BHP’s story was a great story; how they came to the brink of nearly losing it back in the late 1990s and then turned things around and had the biggest boom they've ever seen in the company's history. I just like reading stories and autobiographies. And I didn't read any one Arnold Schwarzenegger to Mike Tyson, Kevin Hart the comedian, I loved his story - and his story is interesting too, because they all have the same steps. To work hard, to have a vision of what you want to achieve, what outcome you want to achieve, work hard find a mentor, be authentic, then give without wanting to receive, all those sorts of things are all very common. And they are people with strong, positive habits.
Having developed a plethora of properties across Australia, Fitzgerald’s strategy is focused on buying land in high growth areas.
We deal specifically just with investors who want to build a property portfolio, so if someone is only looking to buy one property, they wouldn't deal with me. But if you want to build a portfolio of 5-10 properties - and I've got hundreds and hundreds and hundreds of investors with 10 or more, that have bought 10, 15, 17, 20 properties off me over the last 20+ years - then the strategy I have is that we buy land. Number one, we identify land in high growth areas. So I'm just a numbers person. There is only truth in numbers, so I'm looking at land in high growth areas and I'm trying to get the biggest block of land for the smallest amount of a square metre rate that I possibly can in a high growth area. And I want to get my timing right, timing is vital.
So let me give you a practical example of this: In Sydney, as an example, where some of your listeners may be in Sydney (and if you're not in Sydney don't worry, I'll try and put some texture around it). Sydney was a basket case in 2003 to 2011; Sydney had literally no growth. Now from 1998 to 2003, the median house price in Sydney doubled from $260,000 to $520,000. It went up to $560,000 and then came back down to about $523,000 and stalled for eight years. When the GFC hit, Sydney was a basket case. The government was in turmoil, everything was just horrendous.
In 2011 it had been eight years and they had had no growth. I decided we needed to get into there and we needed to get our clients into there, because there was a shortage of land supply and we were able to buy blocks around, because there was some infrastructure being built - the M5 and M7, which was a loop road around Sydney right to the outskirts. It was going to open up lots of areas in the west; 60% of people live west of Parramatta anyway. So we started buying land for $400 and $500 a square metre and doing house and land packages.
With his clients buying house and land packages for $395,000 back then, within 5-6 years that same land has increased in value to $900,000-$1 million.
One of the best sites and best areas that we went to will probably give you an example of how we do our homework. We went to a place called Edmonton Park, which was literally a new city that was being built - or I should say a new town centre that was being built - around a $1.5 billion rail and town centre infrastructure. And we put clients into there when it was just a paddock and the quires paid around $400 a square metre for their land - and their land now was worth about $1,200-$1,300 per square metre. So the land is tripled while the median house price in Sydney is doubled, or just on double.
People often say to me you know, ‘John you buy land in the outskirts. Aren't you better off buying in the 5-10 km radius?’ I say, ‘No you're not, because you can't get the big size blocks, which is 400, 500, 600 square metres. And secondly, if you're buying in the outskirts close to infrastructure it will grow by a faster rate than in the inner areas.’
And I did the example and I took a sale and resale of a house in in Roseberry, which is a case from Sydney CBD, that factual sale in 2007 has grown by 108%, whereas Edmonton Park had grown in the same time by 176%. So if you get your numbers right and you really do look hard at infrastructure, transport, considering all the disabilities and amenities, then you get landed a really good rate per square metre. You absolutely took a huge goal - and that's what we do. We do it in Sydney, Melbourne, Adelaide, Brisbane and we have done a lot in Perth, we did about 500 properties in Perth.
So by the sounds of it, at the end day it seems like a recurring theme because as you said, property or land prices constantly go up; it just depends on the timing of the market.
But it's also getting you cash flow. This is an interesting point you raise: a few of our clients pulled out of Sydney in 2014-15 when the Sydney median house price got to $800,000. But more importantly, the returns on housing were 3.8-3.9%. So it meant that if we were borrowing you know 90% or thereabouts, it would cost us $100-$200 a week. And I just felt that that's too much of a burden. I'd like to buy a property that's cash flow neutral or positive. And I thought that instead of investing $800,000 into a particular area, there was more opportunity for growth in Melbourne. So we hammered Melbourne really hard in 2014-15 and that's all now… we would have made $200-something million out of Sydney for our clients and our clients have made you know the best part of $500 million out of Melbourne in this cycle.
The key points to take away from this is to buy well and ensure you hold your properties for the long term.
Don't be emotional about it. Everyone wants to buy around where they live and where you live is going to boom maybe two or three out of 10 years. You're better off, if you're going to be serious about building a property portfolio over 10 to 20 years, get used to doing your homework and buying in areas before they actually cycle.
For his personal property portfolio, Fitzgerald focuses on residential.
I have housing. To be honest I think there's nothing better now than housing, so I'd buy land and houses. So what my clients do is have a massive portfolio of that. I have a little bit of commercial property, but I found during the GFC, the banks when they do commercial loans that they can make a margin call on you. And I thought that's really tricky for investors you know; so I stick with residential.
And if you look at residential housing here, a really good example is that first block of land I told you about, it must be 50 minutes ago I was buying land for $16,000; that was in Brisbane. That was 1,000 square metres for $16 a square metre. Today that land is worth $750 a square metre. Now do the maths on that: that's 30 years ago. There's nothing you can show me that you've grown as an asset class in Australia that's outperformed residential land in Australia. And we have got the highest population growth in Australian history and with the lowest interest rates people should. But the population growth is in the four main capitals, particularly the three main capitals. So you've got to be careful about where you actually go to.
In terms of personal habits that have aided Fitzgerald in attaining success - both in life and in property - he attributes yoga and meditation.
I get up in the morning at 5:00, I exercise for an hour and I do that because I don't eat anything and it kicks my endorphins and it just starts my day and gives my mind a boost, because successful people are positive people. So you want endorphins, you want to give yourself a chemical kick without coffee and all that sort of stuff as well. So I do an hour of exercise and then I do an hour of meditation and yoga, where I literally just still my mind so that you're literally ready for everything.
And during that time you've prepared everything that you're going to do and then you have breakfast and get to the office and hit the ground running, organise the people with what I want to achieve today. I'm very much an outcome focused person. There's often two types of people in the world - there's process people and there’s outcome people; I'm an outcome focused person. So at the end of each day, I want to have received an outcome. As small as it might be, I want to have achieved an outcome, I don't want to get stuck in the process.
I mean lots of people say yoga asanas or movements or all that sort of thing. True yoga is just a union of your mind, a stillness of the mind. And there's a saying in yoga that the fast mind is sick, the slow mind is sound and the still mind is divine. And when you just still every part of your mind for that period of time, you really do tune in to something, tune in to the universe. I spoke about that, it’s really been a determining factor to every meeting, every coincidence, everything that happens and you just open yourself up to it you know, and I find it quite amazing. So I’ve been practicing that for as long as I can remember.
If Fitzgerald were to meet his past self from ten years ago, what advice would he give?
I'd say just keep doing what you're doing. I love everything that I do and I’d say to myself ten years ago, ‘Slow down.’ But looking back now I'm happy with the pace that I had.
And continuing to work at that phenomenal pace, now he is excited about working on a new project within the next five to ten years.
The next five years, I'm working on a project which is probably the biggest urban project I’ve done. I have a massive block of land in fact on Broadbeach, which is a block of 1,550 apartments. So that will be my big project; over the next 25 hectares of waterfront land, that'll be my big project over the next ten years and where I want to spend a lot of my energy and time.
For such a long term project, Fitzgerald says it’s always important to keep the end goal in mind, as well as working with the right partner.
You always start with the end in mind. So who is going to buy the product and what is the product going to be in that regard? I'm not an apartment developer, so I'll partner with probably one of Australia's top developers or a partner from China or Asia, who has a specific product for a specific market where they have a model and a margin built in. I've had lots of people talk to me, but I've got to find the right partner for that. I mean I'm in no hurry in that regard, I've had the land for nearly 20 years so I'm not in any hurry to do a development there. But I think it will reach a stage of maturity where it will be good to develop it over the next ten years.
If you wish to get your hands on his new book for a great insight into building your wealth through property, here’s how.
The best way is you can buy it the book shops today, I've seen it in all the bookshop, it's called Seven Steps to Build Wealth and please send me a note or send me the book and I'll sign it for you and all that sort of thing. So I like to keep in touch or go on our website Seven Steps to Wealth and you can get get a copy online. You can get it in the bookshops, in the airports, all that sort of thing and all the money goes to charity - so the good thing is that nothing comes to me. So you're doing yourself a favour, but what you'll like about it if you read the book, is it really does give you a template where the proven template is. I've had clients use it for 20 years who are now millionaires and multimillionaires, starting with $50,000, $20,000, $100,000, starting out with a little capital base. So it absolutely does work.
If you want to reach out and learn more from Fitzgerald about his strategy, you can check out his website.
The best way is just go on our website and reach out. In my head office, there's about 60 of us here and if you go on the website and say, ‘Hi John,’ you know it'll come to me. It’ll come through Nathan, who is my executive assistant, and it'll come to me and I'll happily engage with you and you can ask me any question you like particularly about property. I get emails from clients and from people everyday.
You can also find out where he is speaking in all the major capital cities across Australia on how you can kick-start your property journey!
You can find out on our website as well, we do workshops in the main capital cities maybe once a month and I will be speaking. I do speak every three months or so, I've just been a little bit busy going back and forth to China and all that sort of thing; but I often attend and do the workshops and love to say hello to everyone.